I guess I'd challenge that by saying that the market takes care of EROEI on it's own.  Even negative EROEI projects can be money makers...as long as the energy source going in is cheaper than the energy source coming out.  The market usually takes care of these by adjusting on it's own and changing the economics though.  Just think of how the chemical industry works...low value feedstocks...higher value products.  Turning natural gas into ammonia is negative EROEI, but it's still profitable.  Same goes for the energy industry.

 

You're right that a huge swing in the prices of coal or natural gas could change the economics for those processes.  If enough of a demand is placed on nat gas by tar sands, or coal by coal to liquids, the prices will go up and you'll need higher oil prices to support the continued operation.

^Whether or not something makes money isn't the point and it isn't the problem.  The market is reactive to prices it's not proactive. Markets do a lot of things well, but not everything.  It doesn't read  whether or not a resource is being put to its highest and best use and it isn't capable of planning in advance.  The market can't really deal with the question of whether or not we should be wasting natural gas making oil out of tar sands rather than using it to make fertilizer or to heat homes.   

 

This is resource problem that we needed to start preparing for 20 years ago in order to have the smooth and relatively painless transition.  In other words, it needed to start well in advance of the price signals that we are only now beginning to experience.  20 years ago, this was a long term problem.  It's not a long term problem now. Markets don't react to long term problems.  They react after the prices change which in some cases, is too late. 

Well, we passed a new threshhold today. The price of oil hit $90.02 per barrel before settling back to $89.47.

 

Next stop:  $100.

Tick, tick, tick...time runs out while we sleep.  :sleep:

I can see all the newsflashes when it hits $100.

 

Gas was at $2.50 for a while here. Now its back to $2.90. Just as I am about to depart on my second fall foliage vacation too :(

^Whether or not something makes money isn't the point and it isn't the problem.  The market is reactive to prices it's not proactive. Markets do a lot of things well, but not everything.   It doesn't read  whether or not a resource is being put to its highest and best use and it isn't capable of planning in advance.  The market can't really deal with the question of whether or not we should be wasting natural gas making oil out of tar sands rather than using it to make fertilizer or to heat homes.

 

That's actually exactly what the market will decide.  The highest bidder will buy the natural gas and the low bidders will either turn thier thermostats down or stop making fertilizer.  Everyone will get more efficient in the process.

 

I don't see peak oil as something that will all the sudden happen over the course of one year, but rather something that is already starting to happen now as we begin to round over the hump.  The markets are working...prices are going way up...crude oil users are outbidding each other and giving everyone a reason to get more efficient and look at other options.

 

 

This is resource problem that we needed to start preparing for 20 years ago in order to have the smooth and relatively painless transition.  In other words, it needed to start well in advance of the price signals that we are only now beginning to experience.  20 years ago, this was a long term problem.  It's not a long term problem now. Markets don't react to long term problems.  They react after the prices change which in some cases, is too late. 

 

I think here's where we differ. 

 

1) I don't think market transitions are ever smooth and relatively painless.  What we have to avoid here are further wars, not fuel rationing.

 

2) I think the price signals have already started.  The price of oil has quadrupled in about 5 years.  Things have been working, we'll just be able to see it better when we look back in 2020.

 

Getting back to the original point.  Non-conventional oil sources, negative EROEI or not, will continue to provide new floors to our oil prices.  The current floor is being supported by tar sands.  If oil ever drops below $30/bbl, you'll have over 1 mmbpd drop off line and this lack of supply will boost the cost of oil up again.  Next floor...coal to liquids @ $50/bbl.  Who knows what's beyond that...unsubsidized ethanol...hydrogen? 

 

Just because all of these things seem ludicrous from an EROEI standpoint doesn't mean they won't happen.  It starts with the demand for transportation fuel.  What energy sources can we turn into transportation fuels and how much are we willing to pay for them?

The Independent

 

Victims of the ethanol rush: Loss of the native prairie

The Great Plains of Kansas are being transformed by America's thirst for alternative fuels. Some are calling it an ecological disaster. Leonard Doyle reports from Beaumont

 

Published: 19 October 2007

 

Beaumont, (pop 286, 70% Rep, 30% Dem,) is a town so tucked away in the Flint hills of Kansas that it boasts its own fly-in hotel.

 

It is way off the beaten track, far from the bustle of the Interstates, the four-lane arteries that slice through the Great Plains. It was here that I met Pete Ferrell, a rebel rancher burning with anger at the way he says American agriculture is being subverted to the detriment of the planet.

 

And now almost unnoticed by urban America, one of the great ecological disasters of modern times is unfolding as an ethanol-fuelled gold rush engulfs the Great Plains and risks destroying what is left of North America's most endangered ecosystem, the native prairie. The last 35 million acres of prairie, deliberately left alone to preserve a precious ecology, is being ploughed up to produce ethanol from corn.

 

To continue reading, visit:

 

http://environment.independent.co.uk/green_living/article3075697.ece

He speaks...

________________________

 

With Oil Prices Topping $90 a Barrel, the White House Says President Bush Wants Prices Lower

 

10-19-2007 1:55 PM

 

WASHINGTON (Associated Press) --  With crude oil prices crossing $90 a barrel, the White House said Friday that President Bush would like to see prices lower.

 

At the same time, the White House played down the $90 mark. "There's no magic to any number like 90," said deputy press secretary Tony Fratto.

 

"The president certainly would like to see the price of oil lower," Fratto said. He said Bush also would like to see the United States cut its dependence on oil imports.

 

Listen to audio

http://cleveland.cox.net/cci/apaudio/ap-audio-20071019043229-103.mp3

That's actually exactly what the market will decide.  The highest bidder will buy the natural gas and the low bidders will either turn thier thermostats down or stop making fertilizer.  Everyone will get more efficient in the process.

 

The point I'm trying to make is that when it comes to the concept of markets, people often confuse profitability with prudence.  What's most profitable isn't always what is prudent.  In the case of Alberta's natural gas and tar sands, what's most profitable is to use the gas to make tar sands because the gas is captive.  There are no pipelines--which are very expensive to build--to take the gas anywhere else for a more prudent use given the reality of fossil energy depletion.  The more expensive oil gets, the more profitable it will be to keep the gas right there making oil out of tar. 

 

The market also doesn't adequately deal with the problem of the environmental damage tar sands processing does as well as its contribution to climate change.  That's because the market doesn't value the environment, if it did, we wouldn't have an EPA or environmental regulations. 

 

Because the natural gas supply in North America has peaked, and because of climate change and the environmental damage tar sand processing does, the most prudent thing to do is to not waste the natural gas at all on the tar sands.  None.  Period. 

 

I don't see peak oil as something that will all the sudden happen over the course of one year, but rather something that is already starting to happen now as we begin to round over the hump.  The markets are working...prices are going way up...crude oil users are outbidding each other and giving everyone a reason to get more efficient and look at other options.

 

What I was trying to say is that we are getting the price signals too late for the market to be the best way to handle things.  We needed to start making serious changes in the way we use energy 20or 30 years ago. The market didn't think so because fossil energy was cheap, but now, the hour is late and the transition is going to be a lot more difficult than it had to be.  The market alone wasn't the best way to handle it. 

 

Just because all of these things seem ludicrous from an EROEI standpoint doesn't mean they won't happen.  It starts with the demand for transportation fuel.  What energy sources can we turn into transportation fuels and how much are we willing to pay for them?

 

I think this is where we differ:  The way I see it, what can we use for transportation fuel and how much are we willing to pay are the wrong questions to ask.  Given climate change, fossil energy depletion, and other legitimate environmental concerns such as mountain top removal in W. Va and Kentucky what are the most prudent courses of action?  But since the market places no significant value on climate stability or on the environment, it can't properly deal with these questions. 

 

Additionally:  The cheapest and most profitable thing to do is get more efficient with energy.  At $25 per barrel (and even a little less), efficiency is cheaper than fuel, but "the market" didn't continue with efficiency gains after mid 1980's even though significantly more gains were possible-- and profitable.  This is perhaps the biggest failure of the market to act as far as energy goes. 

Good post Gildone.  I think we're agreeing on 99.9% here.  It's just that "the market" is made up of individual projects that work towards turning a profit, not towards being altruistic.  Don't confuse prudence with altruism...a prudent project will turn a profit, an altruistic one will be misers with our natural resources to leave some for future generations.

 

It's difficult for companies to ignore potential profits though.  People in the companies run the numbers, use future projections for the price of natural gas, oil, carbon emissions, construction costs, labor rates etc..., and if it looks like it could still turn a profit, it gets the green light.  That's the reality of the situation whether we like it or not.  It's a shame that such a high quality home heating source like natural gas is being used to heat up tar, but it's making money in today's market, and today's market is being driven by gasoline demand.

 

And you're right about the environmental impacts...that's why we need some regulation. 

 

 

^I guess we are mostly in agreement, except that prudence doesn't have to be altruistic.  Prudence can be profitable.  If a prudent project is one that turns a profit, then there should have been a lot more work done on energy efficiency by now.  Remember, efficiency is cheaper than fuel even at the cost of $25/barrel of oil (or it's equivalent) and that's in today's dollars-- or to put it another way, it's cheaper to save fuel than to buy it. 

 

Efficiency savings drop directly to the bottom line, increasing profits.  Many energy efficiency gains have higher rates of return in a shorter payback period than many other investments.  The definition of prudence is exercising sound judgment.  The sound thing for the market to do has always been greater efficiency, but again, the market has failed to act in the most profitable manner. 

 

In the end, it's economic decisions made by people that constitute "the market." 

Whenever people are involved, there is a certain level of irrational behavior. 

 

Good line, Gildone:  "Efficiency is cheaper than fuel." I'm going to steal it and use it!!

Good line, Gildone:  "Efficiency is cheaper than fuel." I'm going to steal it and use it!!

 

Actually, it's not my line.  I stole it from Amory Lovins at the Rocky Mountain Institute.  :-D

So how do we realize efficiency gains?  We either need to 1) raise the prices for energy (money is the almighty motivator), 2) impose some arbitrary law to force individuals and companies to get more efficient, or 3) get energy companies to incent customers to use less of thier products. 

 

I like #1 and #2.  I don't think #3 fits within capitalism...it's too altruistic ;).  Some might argue that #2 doesn't either, but we can reasonably see that efficiency needs to play a role in our future, so why not use legislation to start down that path.

So how do we realize efficiency gains?  We either need to 1) raise the prices for energy (money is the almighty motivator), 2) impose some arbitrary law to force individuals and companies to get more efficient, or 3) get energy companies to incent customers to use less of thier products. 

 

I like #1 and #2.  I don't think #3 fits within capitalism...it's too altruistic ;).  Some might argue that #2 doesn't either, but we can reasonably see that efficiency needs to play a role in our future, so why not use legislation to start down that path.

There is also: (4) efficiency regulations such as those that make refrigerators use 25% of the electricity that they used thirty years ago.  Another example is CAFE standards for automobiles.

 

As for (3), get energy companies to incent customers to use less of their products, electricity regulations need to be changed so that profits will be decoupled from gross sales.  "Selling more" is an appropriate strategy for a products company, but it is wholly inappropriate for an energy company in a world of declining resources and an overtaxed atmosphere.  It bears mentioning that electricity companies are monopolies and their function needs to be regulated by the government.  That regulation should support conservation of resources. 

 

It is common for electricity suppliers to actively support efficiency improvements at the end use.  Coops and publicly owned companies have an incentive to reduce fuel costs.  Investor-owned utilities are less responsive.  In Ohio, the electricity companies managed to have the efficiency programs removed in 1999 when "we" started down the road to electricity deregulation. 

 

Learn about utility efficiency programs at The American Council for an Energy Efficient Economy:  www.aceee.org

"So how do we realize efficiency gains? "

 

The biggest part of the problem, believe it or not, is simply bad decision making-- and I mean in economic/profit-loss terms. There are a lot of profitable efficiency gains that could have been made long ago and still be made today without regulation, taxes, etc.  But, they haven't been made simply because people make bad economic decisions. 

 

For example, the city of Berea is going to build a new municipal courthouse.  I e-mailed my councilman and asked that it be a green building.  He responded that "we will incorporate some green features, but we have to be cognizant of cost".  The problem is he (and I guess by extension, everyone else with the city who is involved in planning the building), is only thinking of the up-front construction costs.  Green buildings have cost 2% to 7% more than traditional construction.  However, the operational paybacks of that nominal additional cost in a green building are short (just a few years) and over the long run save far more than the additional cost-- not just in energy savings but in increased productivity and reduced absenteeism of employees.  In short:  It's more profitable to build green than it is to build conventional, but most people/decision makers only look at the up front cost, because the either just fail to think more holistically or they are simply incapable of it.

 

Another example is all the fuel that is wasted by trucks idling in truck stops to heat and air condition cabs.  It's more profitable for any trucking company or owner operator to buy trucks with auxiliary power units to heat/cool cabs than to buy a traditional one.  When a big truck gets mileage low-to mid single digits in mileage, it's cheaper/more profitable even at 90 cents per gallon or less to make that simple change and the technology is not anything fancy and could have been done decades ago, but no one did. 

 

Fortunately, it's going to happen now because Amory Lovins at the Rocky Mountain Institute consulted for Wal-Mart and showed them how it's really a least-cost decision (along with other efficiency improvements that Wal-Mart is going to make, which will double the efficiency of their fleet and drive change throughout the trucking industry). Here's a link to an article:  http://www.rmi.org/store/p15details10.php?x=1&pagePath=00000000

 

Again, this could have been done 20 years ago or more, but simple ignorance kept it from happening. 

 

It's quite a bit cheaper over the long run to use compact fluorescent light bulbs rather than incandescents, but still too many people won't buy them because that cost more up front.  It doesn't matter to them that within a couple of years that cost difference is payed back in lower electric bills and by the time it burns out they are money ahead.  People are stuck in the mentality that if it costs anything extra up front, they are losing money-- whether it's individuals making a decision about bulbs or an MBA making a decision on a building or truck design.   

 

This is what I was getting at when I said rational/prudent decisions are not always made in the marketplace.  Sometimes decisions that are profitable don't get made which runs counter to the market wisdom preached in economic textbooks. 

Yes, Gildone, but appliance efficiency standards will force products to have efficiency features that will pay for themselves in short time.  There are building standards in some communities that require buildings to have minimal insulation,  infiltration, and windows performance.  In California, regulations now require fluorescent lighting in public buildings, and it may apply to new construction. 

 

    Which would you rather have, a new energy efficient furnace, or a granite countertop?

 

  Most new homeowners are choosing the granite countertop. What good is wealth if you can't show it off?

 

  Economic decisions are not necessarily rational.

 

  I suspect that Wal-mart has been growing so fast that they didn't have time to worry about fuel efficiency in their truck fleet. They were occupied with making sure that their trucks showed up on time. Now that they are no longer growing so fast, they are looking at ways to cut costs.

Honestly, I have no incentive to be efficient.  I fill up an 11 gallon tank once a month, and my average electric and gas bills are $35/month each.  I realize that I use less energy than average, but the fact still remains that energy is cheap, and until I'm incented to save it, I'm buying that granite countertop.

 

Want me to make smarter decisions when it comes to window insulation and energy efficient appliances?...triple the price of my energy bills.  That oughtta do it.

^ The landlord/tenant relationship has a built in structural problem regarding energy use.  There is scant incentive for the owner to do efficiency improvements if the owner is not paying the bills.  That is why we need product efficiency requirements for new products and new construction, and we also need a comprehensive efficiency program to aid all users/occupants, whether they are owners or renters.

Honestly, I have no incentive to be efficient.  I fill up an 11 gallon tank once a month, and my average electric and gas bills are $35/month each.  I realize that I use less energy than average, but the fact still remains that energy is cheap, and until I'm incented to save it, I'm buying that granite countertop.

 

Want me to make smarter decisions when it comes to window insulation and energy efficient appliances?...triple the price of my energy bills.  That oughtta do it.

 

You've just proved my point well.  For many energy efficiency gains, the incentive is already there or has been for years.  The incentives are often just not recognized-- through either ignorance or short term thinking like looking at the up front cost rather than the life cycle cost. 

 

For example, if you have an old refrigerator, then even at today's energy prices or even energy prices from 5+ years ago (or even more if your refrigerator is really old), you're money ahead buying a new energy efficient model (of roughly equivalent size and features to what you have now).    Within 3-5 years the new fridge will pay for itself-- faster if energy prices rise. 

 

As for Eighth and State's comment about Wal-Mart-- the reasons they didn't pursue efficiency sooner are irrelevant.  The fact is, they failed to recognize a profitable decision for years.  Besides, they aren't the only trucking company in America. No one recognized a profitable decision that was right under their noses.

 

 

 

 

 

 

CNN: http://edition.cnn.com/2007/BUSINESS/10/24/oil.decline/index.html

 

LONDON, England (CNN) -- The world has reached the point of maximum oil output and production levels will halve by 2030 -- a situation that will eventually lead to war and disaster, a report claims.

 

The German-based Energy Watch Group released a report Tuesday saying the world's oil production peaked in 2006 and from now on will drop by around 3 percent a year. It says that by as early as 2030, the global availability of oil will be half of what it was at its peak.

Are we there yet? Based on this chart from the IEA, we just might be. But it will probably take another couple of years to determine whether or not this is a blip, or the peak.

 

For those who may follow EnergyBulletin.net, for the past couple of weeks, the articles posted there have been taking on a more blunt and urgent tone:

 

The peak oil crisis: A message from Houston

 

By Tom Whipple

We gathered at a hotel near the Convention Center, some 525 of us from 18 countries and 36 states attending the Association for the Study of Peak Oil-USA’s 3rd annual conference. The PowerPoints flashed by at mind-blowing speed as speaker after distinguished speaker shared the latest thoughts and insights into the peaking of world oil production.

 

http://www.fcnp.com/index.php?option=com_content&task=view&id=1984&Itemid=35

 

 

Tom Whipple is a retired government analyst and has been following the peak oil issue for several years.

 

 

Oil companies are pretty much up in arms at this point. I have a friend who works for Chevron's research department, and they pretty much know that their reign of oil will soon be ending ... in 25 to 30 years, when other countries sap up the oil reserves and the oil itself begins to dwindle.

 

Private spending on new technologies, such as bio fuels and hydrogen, comes primarily from these big oil companies. They realize that the next big step is not finding major new oil fields with diminishings returns, but to develop new technologies and fuels to propel the next vehicles and generate a healthy return on investment. That includes hydrogen, fuel cells and the like.

 

It's not as if they are sitting back, twiddling their thumbs at America for their oil lust.

^The article wasn't referring to the oil companies.  It was referring to the general public. 

 

For the most part, virtually everyone, including the oil companies, want to try to keep all of the private automobiles on the road running-- in other words try to keep things they way they are now.  It's not going to happen.  It's not simply a matter of  switching to biofuels and fuel cells, etc. from oil.  The only way alternatives will work is to both drastically increase vehicle efficiency AND reduce driving needs by 60-70% through better designed communities and alternatives to driving. 

 

Besides, Chevron is somewhat of an exception.  All of the other oil companies are publicly denying peak oil, regardless of what they may be doing behind the scenes.  All that does is delay action and make the "transition" that much more painful. 

 

Futhermore,  the "transition" is going to begin sooner than 25-30 years.  As the article says, global production of conventional crude peaked 30 months ago.  Global oil production is actually down slightly from two years ago and major non-OPEC sources like Mexico and the North Sea have been in decline for a few years now.  Add in the problem of peak exports-- the issue of soaring demand within oil producing nations of the middle east reducing the amount available for export-- we're very likely looking at problems starting in 3-5 years, barring a  recession. 

Chevron is definitely more willing to engage in the challenges we're confronted with from peak oil. Could you imagine Exxon coming up with a website like this?

 

http://www.willyoujoinus.com/

Earlier this week, a European Organization called Energy Watch released a paper concluding as many others have done that world oil production peaked last year and will decline steeply over the next 22 years so that by 2030 production will be in the vicinity of 40 million barrels per day which is less than half of current production. In ten years production will be down on the order of 20 million barrels per day.

 

What we in America have not yet begun to grasp is that numbers like this imply the near total demise of the private internal combustion powered automobile. Your local gasoline station is at the end of the distribution pipeline and is the most likely to be cut off. If gasoline available for distribution in the U.S. were to fall from 9 million barrels a day to the order of 5 million through a combination of declining production and declining exports, it is not hard to figure out what would happen when the government gets around to prioritizing uses.

 

Food production and distribution would come first, then public health (clean water, sewage, sanitation, medical services), then public safety including the armed forces, and finally some level of economic activity that uses petroleum products.

 

Thirty seconds of pondering this situation should leave you with the idea that there will be very little gasoline available for your gas station to sell to you. For sure, there will be a lot fewer gas stations around ten years from now and you are not going to like the prices.

 

This is the key passage from the article and is a wake-up call for all of us. Change may be coming very quickly, much faster than a lot of people think.

 

If that's the case, the auto is is a dodo and we'd better shift every penny now spent on new roads to rail and transit, bike trails and battery powered plug-in NEV's (neighborhood electric vehicles).

 

Today's autocentric economy is dead man walking. Bye-bye GM, Ford and all the rest. We'll be spending bushels of money retrofitting our homes and buildings with solar panels and redesigning our cities to adapt to the end of oil.

 

I think we are a creative and adaptive lot, so I think we'll make the transition, but it will be a bumpy ride.

Published on Sunday, October 21, 2007 by Pittsburgh Post-Gazette

The admiral's warning

By Dadid M. Shribman

Fifty years ago, he saw today's energy crisis coming, but we didn't listen. Are we listening now?

 

This year marks the 50th anniversary of a number of important cultural markers -- the launch of Sputnik; the publication of "The Cat in the Hat," Dr. Seuss' landmark children's book; the introduction of the Edsel, a symbol of failure, soon after the Bel Air, which became an American icon; the school crisis in Little Rock, one of the biggest battles involving racial integration; and the release of the movie "Bridge on the River Kwai," which went on to win seven Academy Awards.

 

http://www.post-gazette.com/pg/07294/826880-372.stm

 

 

I did not know about Rickover's speech or his foresight on this issue. I love learning new things.

 

True about humans being physically weak. An anthropologist will tell you that a human being is poorly designed creature (for those of you who believe in intelligent design). We can't fly, we can't run very fast, jump very high, or lift much more than our own weight (even for the strongest among us). Put the strongest man in a wrestling cage with a pissed-off, full-grown tiger and I'll bet $100 that the tiger will turn the man into a lifeless rag doll in less than 30 seconds. If man was created in God's image, then man deserves a refund.

 

But we should thank God for our brains, willpower, sense of responsibility and care for others. We should thank ourselves and others when we choose to use them. Now would be a good time to use them and show that we're worthy of such a gift.

Our large forebrain combined with opposable thumbs is supposed to make up for our other physical weaknesses.  You know the old cliche:  "The strong beat the weak, but the smart beat the strong". 

 

Your phrase "when we choose to use them" (i.e. our brains) sums it up well.  There are some critical areas where we keep failing to use them.  Many civilizations and empires have fallen as a result, and we're now in danger of it again, except this time at a global scale. 

 

As Amory Lovins said few years ago:  "we have about 20 years to find out whether this grand evolutionary experiment of combining a large forebrain with opposable thumbs was really a good idea"

 

The clock is ticking.  I hope we make the right choices.

 

Could our car-crazy, oil-constrained lifestyle and the urban sprawl it fosters be on a collision course with the rising need more farmland due to the increasing demand for ethanol as an-oil substitute? It's an interesting paradox....

________________________

 

http://img.coxnewsweb.com/B/01/88/07/image_6007881.gif

 

http://www.daytondailynews.com/n/content/oh/story/news/local/2007/10/29/ddn102907farmland.html

 

Value of Ohio farmland increasing

The price has increased by 10 percent since last year, nearly doubling since 1997 says federal agency.

 

By Ben Sutherly

 

Staff Writer

 

Monday, October 29, 2007

 

DAYTON — In sharp contrast to the real estate slowdown and foreclosure crisis in many of Ohio's largest cities, the value of the state's cropland is soaring.

 

Bare cropland is fetching an average of $3,920 per acre this year. That's up 10 percent in the past year — the fastest annual rate of increase in at least nine years.

 

The price of cropland has nearly doubled from $1,990 per acre in 1997.

Thought you might find this of interest....

 

http://lugar.senate.gov/graphics/energy/security/oil_military.jpg

 

The above graphic from Senator Richard Lugar's staff tells only part of the story (as often happens). The U.S. uses more than 21 million barrels of oil per day, or 7.7 billion barrels of oil per year. So it would seem that the military's usage of 128 million to 142 million barrels of oil per year is tiny. Yet it represents about 90-95 percent of the federal government's oil usage.

 

What I've not been able to find is how much oil the defense INDUSTRY uses. But this can be estimated. Some numbers I've seen are that 4 percent of U.S. GDP goes to defense. If that's correct, and if that same percentage can applied to total oil usage by the U.S., then we're talking about 850,000 barrels of oil per day or more than 300 million barrels of oil per year.

Six more dollars to go until $100...... But CNBC will have a discussion early Friday (6 a.m.) about the potential for oil to hit $300 per barrel!

 

http://news.bbc.co.uk/1/hi/business/7071696.stm

 

Last Updated: Wednesday, 31 October 2007, 17:30 GMT

 

Oil price at record $94 a barrel

 

Oil prices have hit a new record of $94 a barrel, as US government data showed a surprise fall in crude stockpiles for the second week in a row.

New York light crude jumped $3.62, or 4%, to $94 a barrel, while London Brent traded at $90.74 a barrel, up $3.30, in late afternoon trade in Europe.

 

The US government's figures showed that domestic crude stocks fell by 3.9 million barrels last week.

 

Analysts had forecast an increase of 100,000 barrels.

Sorry to keep up the posting frenzy, but IMHO the following is a HUGE admission....(two parts)

______________

 

http://www.davidstrahan.com/blog/?p=67

 

Articles

 

Oil has peaked, prices to soar - Sadad al-Huseini

Posted on Monday, October 29th, 2007

 

(Podcast) Sadad al-Huseini says that global production has reached its maximum sustainable plateau and that output will start to fall within 15 years, by which time the world’s oil resources will be “very severely depleted”.

 

In an exclusive interview with lastoilshock.com, the former head of exploration and production at Saudi Aramco, said that oil production had reached a structural ceiling determined by geology rather than geopolitics, and that the technical floor for the oil price will rise by $12 annually for the next 4 to 5 years as new fields become increasingly costly to exploit. 

 

Listen to the interview with Sadad al-Huseini:  http://www.davidstrahan.com/audio/sadad-al-huseini-29.10.07.mp3

 

http://www.davidstrahan.com/blog/?p=68

 

Oil reserves over-inflated by 300bn barrels – al-Huseini

Posted on Tuesday, October 30th, 2007

The world’s proved reserves have been have been falsely puffed up by the inclusion of 300 billion barrels of speculative resources, according to the former head of exploration and production at Saudi Aramco, and this explains the industry’s inability to raise output despite soaring prices.

 

Sadad al-Huseini’s presentation to the Oil and Money conference in London went substantially as previewed by lastoilshock.com, but the analysis he delivered may also throw light on the infamous OPEC reserve additions of the 1980s.

2007: The Year the Canary in the Coal Mine Croaked

Six more dollars to go until $100...... But CNBC will have a discussion early Friday (6 a.m.) about the potential for oil to hit $300 per barrel!

 

I would be sh%@ing my pants if that happened.

China Raises Price of Fuel Amid Shortage

By SHAI OSTER in Beijing and PATRICK BARTA in Bangkok, Wall-Street Journal, November 1, 2007

 

Bowing to intense pressure, China moved late yesterday to raise the prices of gasoline, diesel oil and aviation kerosene by 500 yuan, or about $67, a metric ton for wholesale prices and by about 10% for pump prices starting today, as regional shortages of fuel spread and even reached Beijing.

 

"The adjustment was made to shorten the gap between highflying international crude prices and domestic oil prices," said China's economic planner, the National Development and Reform Commission, according to the Xinhua news agency.

Why Oil May Not Stop at $100

As Reservoirs Age and Demand Grows, Prices May Go Even Higher

By NEIL KING JR. and GUY CHAZAN, Wall-Street Journal, October 31, 2007; Page A6

 

LONDON -- Oil at $100 a barrel? That may not be the worst of it.

 

Several leading oil experts, gathered here yesterday for an annual energy conference, sketched a near-term future in which mounting global demand and shrinking supplies push oil prices well past the $100-a-barrel mark.

 

Consuming countries, they argued, will simply have to deal with the fact that new pockets of oil are getting far harder and more expensive to tap. That, combined with years of underinvestment by the industry, has led to a tapering off of new oil supplies that will continue for years, despite rising energy demand in Asia, the Middle East and some industrialized countries.

Four more dollars to go to the century mark! West Texas Intermediate crude, the benchmark for U.S. oil, just hit $96.24 during overnight hours trading.

 

We'll see what Asian and European traders do by morning.

My best is $100 by November 10.

I think it could hit $100 by the end of trading Friday.

Six more dollars to go until $100...... But CNBC will have a discussion early Friday (6 a.m.) about the potential for oil to hit $300 per barrel!

 

what do they know?  that would be the equal of having a panel about the potential for the dow to hit 42,000

Matt Simmons thinks $200/barrel by 2011 or 2012.  I'd believe him before I'd believe a CNBC panel.  The way the dollar keeps falling and the way demand isn't slowing down and the way that production is no longer growing, then short of a major recession, I don't think $200 can be avoided by then.  But I'm no expert, so we'll just have to wait and see.

We might be getting to the time where the market actually works and finds a point where demand destruction starts happening.  Exciting stuff!

 

I want to believe that this isn't just speculation, but it's got to be a big part of it.  On the other hand, people need oil!  They're willing to pay far more than the current market value to get the available supplies.  So who knows, maybe this isn't just speculators.

 

I just heard Maria Baritoromo do a guest spot on the Today Show this morning.  She said something like, "Traders are worried that the world's supplies are dwindling and won't be able to keep up with demand."  That's the first time I've heard an accurate description of the problem.  The talking heads typically point to "above ground factors", or "geopolitics" as reasons for increases.

Six more dollars to go until $100...... But CNBC will have a discussion early Friday (6 a.m.) about the potential for oil to hit $300 per barrel!

 

what do they know?  that would be the equal of having a panel about the potential for the dow to hit 42,000

 

Turns out it wasn't a CNBC discussion. CNBC was covering an event happening today -- several retired government cabinet officials and military leaders were participating in a mock scenario in a "war-room" setting. It was a pretty elaborate mock-up, including large maps on the wall, a fake television news broadcast about the Iranians blocking the Straits of Hormuz, supply problems at the Caspian Sea (that's actually very real) and I think a major hurricane hitting the Gulf of Mexico -- all at the same time. The scenario was that these events were causing oil to hit $300 per barrel, and these former government and military leaders were being asked to advise the president on a course of action.

 

However, a steadily worsening supply situation may get us to that $300 per barrel mark within a decade or two, without a sudden disruption like the made-up situation above. That is, unless we get serious about creating more meaningful incentives to conserve fossil fuels AND develop renewable alternatives.

We might be getting to the time where the market actually works and finds a point where demand destruction starts happening.  Exciting stuff!

 

I want to believe that this isn't just speculation, but it's got to be a big part of it.  On the other hand, people need oil!  They're willing to pay far more than the current market value to get the available supplies.  So who knows, maybe this isn't just speculators.

 

I just heard Maria Baritoromo do a guest spot on the Today Show this morning.  She said something like, "Traders are worried that the world's supplies are dwindling and won't be able to keep up with demand."  That's the first time I've heard an accurate description of the problem.  The talking heads typically point to "above ground factors", or "geopolitics" as reasons for increases.

 

I've also noticed that some of the media folks are taking notice that there is a supply problem. While speculators are getting in on this, some of whom used to put their money into real estate (the market for which has burst), are putting their money into commodities because the fundamentals support them doing so (flat supply, rising demand). All one needs to do is look at the chart from the EIA that I posted on the preceding page of this thread to realize what the problem is. See http://www.urbanohio.com/forum2/index.php?topic=2706.msg231418#msg231418

 

All the technologies being used (horizontal drilling, sea water injection, etc.) are merely able to keep the global supply from falling. The only thing that those technologies do is cause the supply to be exhausted more quickly. And when those "Super Straws" start gurgling at the bottom of the largest glasses (Ghawar, Burgan, Cantarell etc), watch global production plummet.

Here's another admission, though still conservative. This also comes on the day that ExxonMobil announced that its oil production dropped 2 percent and refinery margins are very small (likely a big reason why the rise in gasoline prices hasn't matched the surge in oil prices)...

 

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http://www.ft.com/cms/s/0/b0d83bfa-87df-11dc-9464-0000779fd2ac.html?nclick_check=1

 

Total chief warns on oil output

 

By Ed Crooks in London

 

Published: October 31 2007 18:50 | Last updated: October 31 2007 18:50

 

The world’s capacity to produce oil will fall well short of official forecasts, the chief executive of Total warned on Wednesday

 

In an unusually stark prediction for the head of one of the world’s biggest oil companies, Christophe de Margerie, CEO of the French group, said it would be difficult to reach even 100m barrels a day.

 

The International Energy Agency, the rich countries’ watchdog, in its “business as usual” projections, has said oil supply will reach 116m barrels a day by 2030, up from about 85m b/d today. The US government has a similar forecast of 118m b/d in 2030, including a relatively small contribution from biofuels.

Six more dollars to go until $100...... But CNBC will have a discussion early Friday (6 a.m.) about the potential for oil to hit $300 per barrel!

 

what do they know?  that would be the equal of having a panel about the potential for the dow to hit 42,000

 

Here ya go. It's called the “Oil Shockwave” simulation. It's the second simulation since 2005, and will feature former Treasury Secretary Robert Rubin; former Deputy Secretary of State Richard Armitage; former commander of U.S. Central Command retired Army Gen. John Abizaid; former Secretary of the Navy and 9/11 Commission Member John Lehman; former 9/11 Commission Executive Director Philip Zelikow; former White House Press Secretary Mike McCurry; former EPA Administrator Carol Browner; and Pulitzer Prize winning author Daniel Yergin.

 

The inclusion of the last person is laughable. He'll probably tell everyone "don't worry about it -- just get in your Hummers and go home to your McMansions in Deer Kill Estates."

 

http://www.peakoil.com/modules.php?name=Forums&file=viewtopic&t=33484

Note text in bold. Earlier this week, ExxonMobil reported its production was down 2 percent despite increases in its capital and exploration budget. Now Chevron reports that its production is down. Granted, Chevron is a Venezuelan-based company, but they do have operations elsewhere. Why couldn't they get more production elsewhere in the world? Why? Because apparently they can't....

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http://www.reuters.com/article/ousiv/idUSN0254833720071102?sp=true

 

Chevron earnings fall over 25 percent

Fri Nov 2, 2007 10:25am EDT

 

By Michael Erman

 

NEW YORK (Reuters) - Chevron Corp's (CVX.N: Quote, Profile, Research) third-quarter earnings fell more than 25 percent, missing analyst estimates on sharply lower profits from gasoline production.

 

Margins to produce gasoline and other refined products plummeted during the quarter as prices for the fuel did not keep pace with surging crude oil prices, dragging down earnings across the industry.